Retirement Angels' Alan Higham talks to Helen Morrissey about how the RDR will affect his firm and the adviser community.
How are your preparations going for RDR?
We already agree with clients in our initial conversation how they want to pay our fees, whether it be by direct payment or from a commission from their pension pot. We receive strong positive feedback from clients for this part of our interaction with them and it is one of the reasons they choose us to advise them.
Our entire client advising staff will have attained Diploma standard qualification by the end of 2011, a full year ahead of the requirement.
Following the acquisition of Annuity Direct, we have injected further working capital so that we more than meet the new requirements. The additional investment will be spent on developing our IT systems and people in advance of the growth in business we expect to develop during the next few years.
What have been the key challenges that Retirement Angels has faced during this process and how have these been overcome?
We totally welcome and embrace the requirements of the RDR. Our own professional and business standards already met the requirements and we believe it is a good thing for the IFA community to improve its professionalism, transparency and financing. We have had no problems.
How prepared do you feel the advisory community is as a whole for the advent of RDR?
Advisers come in all different shapes and sizes, so inevitably there will be a mixed result. Many people may find it hard to achieve the required professional standards in time. Areas of specialism such as at-retirement advice also need extra care. The FSA Training & Competence (T&C) sourcebook requires firms to ensure that all employees have the relevant skill knowledge and expertise to fulfill their role.
The FSA have recently issued guidance on T&C making it an area of focus. Generalist IFAs who only have a handful of clients retiring each year may face a significant burden to show that their knowledge is totally up-to-date at all times. We expect to see more IFAs making use of specialist firms like ours to help with these tasks.
What do you think will be the overall impact of RDR on the advisory community?
The FSA has allowed firms who don’t give regulated advice, but instead promote the purchase of financial products by consumers, exemption from the RDR. If you sell someone an ISA then you can receive a commission, you don’t have to have qualified staff dealing with the consumer and the firm is allowed to give information, provided it doesn’t constitute ‘advice’ in the regulated sense.
I think more advisers will adopt the non-advised models. The FSA may come to regret this as consumers may well buy inappropriate products and suffer loss only to find that there is no-one to turn to for re-dress. The FSA needs to urgently consider whether certain products are too high risk to be sold in this way.
We would say that the decision to purchase a retirement income product which often can irreversibly determine a person’s income for life and where the wrong decision could cost half their income is one such area. The FSA should require all firms to meet the RDR on retirement income sales. The crucial point is that consumers don’t know what they don’t know and often mistake ‘information’ or ‘guidance’ for advice.
Combined with the Treasury’s decision to remove the obligation to buy an annuity, there is a significant risk of a mis-selling scandal in this area if the FSA does not put appropriate safeguards in place. The Actuarial Profession has warned the government on this subject and we understand that the FSA are considering what to do.
What are your aims as a firm post RDR?
To provide the best advice to people at retirement to ensure they maximise their lifetime income. We want to help as many people as possible and are looking to build partnerships with other companies who have the same objectives for their clients, employees and scheme members.
Alan Higham is CEO of Retirement Angels
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